Lolapps merges with 6waves to take on Zynga

Lolapps, the San Francisco-based startup that makes games for Facebook and other social networks, has signed a merger agreement with Hong Kong-based game publisher 6waves, the two companies announced Monday. The newly merged company will have one major competitor in its sights, Lolapps CEO Arjun Sethi and 6waves CEO Rex Ng told me in a joint interview last week: Zynga, the web industry’s top social game developer and publisher.

“We’re going to be the clear number two in the space very quickly,” Sethi said, adding that Zynga’s move to file for an initial public offering earlier this month has only served as motivation for the newly merged companies. “For us it’s even more exciting” now that Zynga has filed its IPO documents, said Sethi. “We see how hard we have to look to compete and grow at the same scale.”

The combined company will be known as “6waves Lolapps,” à la Activision Blizzard. Terms of the deal are undisclosed, but the combined entity of 6waves Lolapps will have 120 full-time employees. Lolapps has raised $4 million in venture capital to date; 6waves has taken on a reported $17.5 million. Ng will serve as 6waves Lolapps’ CEO, and Sethi will report to him.

Both companies have been operating profitably to date, the executives said, but post-deal the combined company will likely start burning some of its cash to invest in expansion. “We’re definitely going to be in growth mode,” said Ng, adding that the company will likely take on a new venture capital round sometime within the next six months. The majority of 6waves Lolapps’ employees will be based in San Francisco; the remainder of the company’s staff will be spread across offices in Hong Kong, the United Kingdom, and Japan. International growth will be a major focus for the company in the months ahead, both executives said.

The two companies have partnered for more than a year, and since they deal in different realms — game publishing and game development — they do not expect to have to tackle many integration costs or post-deal layoffs. Going forward, 6waves and Lolapps will continue to function independently as a game publisher and a game developer, respectively. “That’s probably the most important and exciting part — there’s no redundancy, so we get to double down faster,” Sethi said.